The common fate of the housing market in Iran and Turkey / Solving the rental crisis depends on the ballot box?

According to Tejarat News, the housing market crisis in Turkey has created difficult conditions for citizens. A large section of Turkish people, like Iranians, have faced difficulties in buying housing and due to the unprecedented growth of rent prices, they are unable to renew their rental contracts.

The report that was recently published by Al Jazeera about the housing market of this country is a proof of this. As this news agency has written, one of the victims of this crisis is a family of three. This family had to negotiate with the landlord before they could sign a contract to renew the annual lease of their house in Istanbul’s Bostanci neighborhood.

With the expiration of the contract, now according to what the landlord told them, the monthly rent of the family’s two-bedroom apartment, where they live with their seven-year-old son, has increased by 147% in one year; In this way, the rent of this house has increased from 4650 Turkish lira to 11500 lira (about 600 dollars), which is 25% more than the minimum wage in Turkey.

The head of this family says: “I recently lost my job and my wife’s salary can almost only cover the rent. We will try to live off the statutory severance pay I received until I find a new job. “I don’t know what we would have done if I hadn’t received it.”

He also said that new tenants pay about 15,000 liras ($770) for apartments similar to theirs.

75% increase in property prices in US dollars

According to data from the Central Bank of Turkey, property prices across the country recorded an annual increase of 141.5 percent in Turkish lira terms in February. The price of the property has increased by 75% in US dollars during the same period.

Another Turkish citizen, who works in the field of engineering, said that the rent for his house was 4,000 liras last year, and now the rent in the new apartment has increased by 10,000 liras (approximately $514).

He added that people who have lived in a property longer often face more modest increases in their rents. The 38-year-old also identified the main problem as finding a place to live without a strange lease.

The roots of the housing crisis in Türkiye

Seiftin Gursel, professor of economics and director of BETAM, said: The roots of Turkey’s housing problems today lie in the crisis of 2018, which led to a sharp drop in prices at a time when large amounts of unsold housing stocks were accumulated in Turkey.

He added: New housing projects at that time were greatly reduced due to the crisis. The construction industry lost a third of its employment in two years. Following this crisis, finally, the supply of housing for sale decreased.

Also, the Central Bank of Turkey has reduced its main interest rate from 19% to 8.5% from the end of 2021, regardless of the increase in inflation. Experts say this has led people to invest in real estate, as Turkish lira savings are likely to depreciate due to continued devaluation and inflation. This is despite the fact that the more people invest in property, the higher the price of housing.

Strong reaction against foreign buyers

Foreign buyers who have invaded the Turkish real estate market in the past few years are also one of the factors of increasing rates in this country. They have been drawn to this country by the fall of the lira and relatively easy and short access to Turkish citizenship through the purchase of a house.

According to Siftin Gursel, the increase in the sale of housing to foreigners has led to an extraordinary increase in prices, especially in tourist areas such as the southern provinces of Antalya and Mersin.

In the latest BETAM report covering housing prices in March, the annual growth rate was 137.5% in Antalya and 139% in Mersin.

According to the Turkish Statistical Institute, house sales to foreigners in 2022 increased by 15.2 percent compared to the previous year. According to this institute, the largest number of housing sales were to Russian citizens, followed by Iranians and Iraqis, and Ukrainians are in sixth place.

One of Erdogan’s main rivals in yesterday’s presidential election was Kemal Kilicdaroglu, who blames Erdogan’s capitalism for the housing crisis. He has promised to ban property sales to foreigners until the housing crisis for Turkish citizens is resolved.

Kılıçdaroğlu also recently promised to quadruple the stock of social housing within five years and to keep social housing rents at 20 percent of the minimum wage.

The impact of the Turkish earthquake on housing prices

Strong earthquakes in southeastern Turkey in February destroyed or severely damaged more than 200,000 buildings in the affected areas, forcing many residents to evacuate and increasing demand in other cities.

Gorsel has said that the demand for real estate is likely to decrease with the fear of future earthquakes and the distrust of many Turks in the housing market.

He added: Government policies to increase housing – both new projects and urban transformation projects to prepare for earthquakes – will bring more supply to the market.

These dynamics may hold back real price gains, he said. This professor of economics believes that the movement in the exchange rate of the lira affects the prices, because the resources of the construction industry are often purchased using foreign currency.

The situation of the Turkish housing market, especially in the last two years, has moved towards a crisis; As it was said, Erdogan’s critics consider his policies to be effective in creating this crisis. Now the presidential elections in Turkey have been extended to the second round, the activists of the housing market of this country have their eyes on the final results of the elections and the possible change of policies.

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